UPDATE: 12/4/13, 6:39 p.m. EST. The names of the lawyers from Mayer Brown also advising ArcelorMittal have been added to the ninth paragraph of this story.
German industrial conglomerate ThyssenKrupp has found a way out of its disastrous investment in the U.S. by agreeing to sell an Alabama steel plant to a joint venture between ArcelorMittal and Japan’s Nippon Steel & Sumitomo Metal for roughly $1.6 billion.
The transaction, which was announced on Nov. 29, comes six years after the community of Calvert, Ala., prevailed in a fierce battle with nearby Louisiana to host a $3.7 billion ThyssenKrupp steel mill designed to serve as the finishing point for cheap Brazilian steel.
But a confluence of factors that included Brazil’s economic boom, rising labor costs and falling steel prices hit ThyssenKrupp’s bottom line hard, according to The Deal. As a result, the Essen-based company has now agreed to sell the Calvert plant to ArcelorMittal and Nippon Steel, with Bloomberg reporting that the joint venture between the two will also purchase 2 million metric tons of slab from a facility owned by a ThyssenKrupp affiliate in Rio de Janeiro over the next six years.
Shearman & Sterling and Sullivan & Cromwell are representing Luxembourg-based ArcelorMittal and Tokyo-based Nippon Steel, respectively, on the transaction. The deal, which was announced on Nov. 29, will see each joint venture partner own a 50 percent stake in ThyssenKrupp’s U.S. unit once the deal closes in the second quarter of next year.
ArcelorMittal, created after the $33 billion merger between Luxembourg’s Arcelor and India’s Mittal Steel in 2006, is the world’s largest steel company. Trailing close behind is Nippon Steel, which was formed through another $33 billion merger between Japanese steelmakers Nippon Steel and Sumitomo Metal Industries in 2011. (The two steel giants already jointly produce steel from a plant in New Carlisle, Ind.)
Shearman M&A partners Peter Lyons and George Karafotias are leading a cross-border team from the firm advising ArcelorMittal on the deal. The other Shearman lawyers working on the matter are tax partner Douglas McFadyen, employee benefits deputy practice leader Doreen Lilienfeld, IP transactions cochair Samuel Waxman, environmental counsel Jason Pratt, finance counsel Gabrielle Wong and associates Nader Daboo, Michael Dockery, Cecilia Ferreira, Caitlin Ludwigsen, Ed Mullen, Rory O’Halloran, Jennifer Stadler and Christopher Tomlinson.
Karafotias led a Shearman team advising ArcelorMittal earlier this year on the $1.1 billion sale of a 15 percent stake in its Canadian iron ore business, as well as the company’s $605 million sale last year of its Skyline Steel unit.
Indian billionaire Lakshmi Mittal, who serves as ArcelorMittal’s CEO, told The New York Times over the weekend that his company’s investment in ThyssenKrupp’s Calvert facility is a sign that the global and U.S. economies are on the rebound and returning to prefinancial crisis levels. (The worldwide economic downturn was a key factor in plummeting steel prices.)
Lewis Kaden, a former Davis Polk & Wardwell corporate partner and current vice chairman of financial services giant Citigroup, serves as lead independent member of the board of directors at ArcelorMittal. Dutch lawyer Henk Scheffer is the company’s corporate secretary. Mayer Brown is serving as special counsel to ArcelorMittal on its joint venture with Nippon Steel through corporate partners John Sagan and Robert Baptista and associates Jason Wagenmaker and Michael Weigel.
S&C corporate partner Robert DeLaMater, a longtime legal adviser to Nippon Steel, is taking the lead advising the Japanese company on its partnership with ArcelorMittal in Alabama.
Other S&C lawyers working on the matter include antitrust partners Steven Holley and Juan Rodriguez, tax partner Ronald Creamer Jr., IP partner Nader Mousavi, employee benefits counsel special counsel Rebecca Coccaro, environmental special counsel Matthew Brennan, antitrust special counsel Eric Queen and Bradley Smith, European counsel Axel Beckmerhagen, and associates Jinhee Chung, Michael Engel, Alice Lee, Rosita Lee, Kevin Salinger and Amaris White. (S&C hired Mousavi in 2010 from Wilmer Cutler Pickering Hale and Dorr to cohead its IP practice.)
ThyssenKrupp’s U.S. unit, meanwhile, has turned to Linklaters for counsel on the transaction. Corporate partners Ralph Wollburg in Dusseldorf and Scott Sonnenblick in New York are leading a team from the Magic Circle firm advising ThyssenKrupp.
Linklaters has handled a number of deals for ThyssenKrupp since raiding Magic Circle rival Freshfields Bruckhaus Deringer—a firm formed in 2000 through a three-way merger with two top German firms—to hire Wollburg in 2007. Other Linklaters attorneys working on the current deal include global tax head Gordon Warnke, M&A counsel Sean McKeever and associates Andrew Cohn, Dirk Horcher, Alexander Juengst, Jennifer Kim, Kristina Klaassen, Clara Pang and Nandini Sur.
Brazilian firm Lefosse is also advising ThyssenKrupp, according to German legal publication Juve. Sibling publication Corporate Counsel reported last year on ThyssenKrupp’s hire of Deutsche Bank’s chief legal officer Arne Wittig to become its new general counsel.
A year ago this month ThyssenKrupp suspended Jurgen Claassen, a former member of the company’s executive board who was tasked with overseeing its legal and compliance functions, for his role in a boardroom corruption probe and the ill-fated decision by Germany’s largest steelmaker to expand into the Americas.
ThyssenKrupp has since undergone a restructuring of its in-house legal department, with former general counsel Klaus Wiercimok serving on the company’s supervisory board along with fellow German attorney Sabine Maassen.
As part of the deal with ArcelorMittal and Nippon Steel, ThyssenKrupp also said it would buy back some stainless steel assets it sold to Finland’s Outokumpu last year. The Am Law Daily reported at the time that Helsinki-based Hannes Snellman and Freshfields counseled ThyssenKrupp on the $1.3 billion deal with Outokumpu, which was in turn advised by Skadden, Arps, Slate, Meagher & Flom and White & Case.
ThyssenKrupp’s planned exit from the United States wasn’t the only steel deal announced Monday. Los Angeles–based private investment firm Revolution Capital Group unveiled its acquisition of Allentown, Wis.–based sheet metal products maker Maysteel for an undisclosed sum.
Thomas Cleary, a corporate partner with Dykema Gossett in Los Angeles, serves as outside general counsel to Revolution Capital. Dykema has handled several deals for Revolution Capital— such as its $9.5 million buy of the Tampa Tribune last year—since Cleary joined the firm in November 2011 from SNR Denton.